Low credit score? Not getting accepted for credit? Learn how to improve your credit score fast with these eight simple tips.
First, find out your credit score. Contact one of the three credit scoring agencies and ask for your credit score. The credit score in itself isn’t an indicator of your credit – instead, it’s just a number that agencies use to decide whether you’re a good risk or not. Having a low score doesn’t mean that you won’t get credit, but it does mean that you’ll likely have to pay higher interest rates on your mortgage and loans. A low credit score could also make it difficult for you to get new credit. Once you’ve gotten your score, you can then start to take some of the steps below to improve it.
Get a Credit Card
Having a credit card does not make you a bad risk for credit. In fact, it makes you a good risk, as it shows that you can pay back money responsibly. If you already have credit cards and you’re unable to make the payments, shift the balances to one credit card (ensure that it’s a balance transfer card) and make regular payments every month to shift the debt. Once you’ve cleared the debt, close the account and get a new credit card. Spend up to $200 per month – some people use their credit cards for gas only, for example – and pay it back in full at the end of each month.
Pay off Debts
It’s an obvious one, but it needs to be here for a reason – lenders won’t give you any money if you’re already in debt and not paying it back. Lenders like to see a gap between the amount of credit that you’re using and the credit limit that you have. For example, if you have a credit card with a limit of $1000 and you’re at the limit, it shows that you might not be able to pay back new credit. But a credit card with a limit of $1000 and a balance of less than $300 shows that you can spend money and pay it back, improving your score.
Don’t Spend Big Bucks
Yes, it’s a good idea to have credit cards and to spend on them. But spend too much, even if you pay the balance off in full, shows that you’re a big spender and it can worry potential lenders. Spend less than 30% on each card and pay it back in full at the end of each month. That way, when your balances are reported to the credit agencies, it’ll clearly show that your balances have stayed below 30%.
Check Your Credit Limits and Your Report
Your credit report will show details of each credit account you have, as well as the limits on those accounts. Double check all limits on your credit report, as sometimes, when lenders update your limit and give you more credit, they fail to update the limit on your credit report – so it can look like you’re either going over your limit every month if you spend more money or like your balance is small. Also, some agencies don’t disclose credit limits, and typically, the bureaus will take your highest balance as the credit limit. If you regularly spend $2000 on a card each month, say, and your limit is $5000, but your agency does not disclose your limit, it’ll look like you’re maxing out your card. Limit your spending and if you have to spend more, spread your spending over a few different cards.
Spend on Old Cards
The older your credit history the better, and so if you keep one credit card open for a number of years, spending on it regularly, the better your credit score will be. Dust off those old cards in the back of your wallet and if the account isn’t closed, use them once in a while. Take your partner out for a dinner date, pay the card back in full at the end of each month and get your reward in the form of a better credit score.
Ask Nicely
If you have late payments on your account and you have an otherwise good relationship with the lender, write to them and ask very nicely whether they’ll be able to erase one or more of the late payments. This tends to work if you have a long and otherwise unblemished relationship with the company. If not, ask if they’d consider erasing any late payments after you’ve made a series of on-time payments, for example, after a year of on-time payments. Most companies will be willing to do this especially if you back yourself up with plenty of on-time payments.
Erase Old Negative Amounts
If negative accounts and amounts are still lingering on your credit record, it’s well worth contacting the bureau to add a notice of correction to the account. Tell them that the charge is not yours, and that you believe it to be unjust (if you’re telling the truth, of course) and they might just erase it. If not, get them to put a notice of correction next to the negative account explaining why it is there and why you believe it to be unjust.
Correct Any Errors on Your Account
Old addresses, an incorrect telephone number and a number of different occupations listed in your credit searches can all lower your score. Ensure that your details are clear and consistent across all of your reports with all of the relevant bureaus and get them corrected if not.
Finally, stop making credit applications. The more applications that you make that are rejected, the lower your score will be and the more likely it will be that your next application will be rejected too. If you’re rejected, leave it at least three months before applying again, especially if you want to apply for something big like a mortgage in the near future.